Manufacturing grew for a 10th straight month in May and construction spending notched its fastest pace in nearly 10 years in April, suggesting the U.S. economy will add jobs and weather Europe's debt storm. While the expansion in manufacturing was a touch slower than the prior month, the report on Tuesday showed underlying strength in the sector with the employment measure touching its highest in six years. The Institute for Supply Management's index of national factory activity slipped to 59.7 from 60.4 in April, but was above market expectations for 59.0. A reading above 50 indicates expansion in the sector. Export orders were the highest since December 1988. Separately, construction spending in April rose 2.7 percent, the biggest advance since August 2000, from a gain of 0.4 percent in March, a Commerce Department report showed. That was well above market expectations for a flat reading and gains were broad-based.

A picture of a steady but still sluggish economic recovery emerged from reports Thursday that showed fewer people were claiming unemployment aid while United States exports were slowing. The reports echo a suggestion this week from the Federal Reserve chairman, Ben S. Bernanke, that the rebound will remain intact despite high unemployment, a fragile housing market and Europe’s debt crisis. But it will take time to create enough jobs to bring down the 9.7 percent unemployment rate. The trade deficit widened to $40.3 billion in April, up 0.75 percent from March. Exports dropped 0.7 percent while imports declined by 0.4 percent. For April, exports slipped to $148.8 billion; demand for farm products fell by $647 million and weakness spread across a number of manufactured goods, from electric generators to industrial machinery and aircraft engines. Imports edged down to $189.1 billion. Demand for oil was basically unchanged from March, while total consumer goods imports dipped by $741 million, with the biggest decline coming in pharmaceutical products.

During the first quarter of 2010, hourly compensation from previous quarter, annual rate remained the same in total manufacturing, down 0.4 percent in durable manufacturing and up 0.3 percent in nondurable manufacturing.

When consumer prices were taken into account, real hourly compensation from previous quarter, annual rate (revised) of all manufacturing workers decreased 1.5 percent in the fourth quarter, and decreased 0.7 percent (revised) in the annual rate of 2009.

In the first quarter of 2010, hourly compensation of all manufacturing workers grew 1.8 percent (revised), compared to a 5.4 percent increase during the first quarter of 2009. Real hourly compensation in the total manufacturing sector decreased 0.6 percent (revised) in the first quarter of 2010, compared to 5.5 percent increase in the first quarter of 2009.

In the fourth quarter of 2009, manufacturing profits increased 23.7 percent, or $30.8 billion, to $160.5 billion from $129.7 billion in the third quarter. Compared with third quarter profits of 2008, manufacturing profits were down $76.0 billion in the third quarter of 2009. (NOTE: The manufacturing profits for first quarter 2010 will be updated in the next release.)

First quarter 2010 profits for all non-financial industries (manufacturing being a subcategory) increased 16.5 percent from the fourth quarter of 2009 to $991.8 billion.

In April 2010, manufacturing industries (NAICS based) operated at 71.2 percent of capacity, 7.8 percentage points below their 1972-2009 average of 79.0 percent and 0.8 percent points higher than their revised capacity utilization level in March 2010.

Manufacturing sector productivity (revised) rose 1.5 percent in the first quarter of 2010, as output increased 7.2 percent and hours increased 5.6 percent. Productivity grew 3.0 percent in the durable goods industries and 0.9 percent in the nondurable goods industries. Unit labor costs in manufacturing declined 1.5 percent in the first quarter of 2010 and fell 5.1 percent over the last four quarters

In durable goods industries, productivity (revised) grew 3.0 percent from previous quarter, annual rate in the first quarter of 2010, as output increased 10.2 percent, while hours worked also increased 7.0 percent.

In nondurable goods industries, productivity (revised) grew 0.9 percent from previous quarter, annual rate in the first quarter of 2010, as output increased 4.4 percent, while hours worked also increased 3.4 percent.

Economic activity in the manufacturing sector expanded in May for the 10th consecutive month, and the overall economy grew for the 13th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

Manufacturing continued to grow in May as the PMI registered 59.7 percent, a decrease of 0.7 percentage point when compared to April's reading of 60.4 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

The percentage-point changes in the components of the PMI in May were: Employment up 1.3 points to 59.8, Inventories down 3.8 points to 45.6, Production decreased 0.3 points to 66.6, and Supplier Deliveries down 0.3 points to 61.0. New Orders remain the same at 65.7.

Prepared by
Director of Office of Trade Industry Information
Manufacturing and Services
International Trade Administration
U.S. Department of Commerce
(202) 482-4691

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